Liability Insuranc3 Flashcards
Why is there a need to effect employer’s liability
So that if a court action is lost the employee’s successful claim for damages is covered by the insurance
Employer’s Liability Act 1969
That employers in Great Britain must be insured against liability for bodily injury or disease sustained by their employees arising out of and in the course of their employment in the business
What did the Employer’s Liability Compulsory Insurance regulation 1988 change
It made a key extension increasing the minimum limit from 2 million pounds to 5 million pounds. Insurers usually provide a 10 million pound limit
What type of accidents make it difficult to know who should be held responsible and liable for subsequent employer’s liability claim
Many industrial illness and some accidents
In 1999 EL service was set up to address which issues
If the original company who employed the claimant at the time the illness was contracted or accident occurred had
1.changed insurers
2.been taken over by another and so change in the name
3.cease trading due to bankruptcy
Or if the original insurer had been taken over/cease trading
EL service was replaced by
Employers Liability tracing office(ELTO)
What is the employers Liability Tracing office job(ELTO)
It is an independent, not for profit company set up by the insurance industry, to provide claimants and their representative with quick and easy access to a database of EL polices through an online enquiry facility
What did the FCA make compulsory in April 2012 in relation to EL
It made it compulsory for all members of the ELTO to provide details of their employers liability policies along with policy records relating to historic covers triggered by claims to allow the tracking of policies by claimants through employers’ liability Database
What was another additional requirement by the FCA
All employers to provide their EL insurers with an employer reference number, the number is unique to the employer and can’t be replicated. All insurers must supply the ERN to the Employers Liability Database(ELD)
Employer Liability Tracing office has adopted the employer reference number as the most effective unique identifier available. Why is that so
This is because even if the employer is taken over/ceases trading/moves tax office the ERN for a specific point in time is permanent
Regular users of the ELD are required to register to gain access to unlimited number of enquiries. How is the registration process
Registration is free, benefits of registration include pre-population of some data fields and unlimited enquiries
Does EL policy have a standard wording
No, wordings vary between insurers
It is common to issue combined liability policy,, than separate ones. What do they constitute of
They constitute of Employers/Public/Product liability. Although separate sections and clause usually apply to each type of liability
All employers Liability policies provide indemnity to
To the insured for legal liability for damages(including claimant costs and expenses) in respect of bodily injury/death/disease/illness sustained by any person under a contract of service/apprenticeship with the insured
For EL to be effective it has to be
- caused during the period of insurance
- arising out of and in the course of their employment by the insured
- in connection with the trade/b’ness
- occurring within certain territorial limits
Under the term Legal Libaility, The Employer Liability policy only indemnifies
It only indemnifies the insured in respect of their legal liability to pay damages
When an accident occurs and its a pure accident no negligence, which policy is supposed to be in effect
The employee must rely on personal accident and sickness insurance/social security system to obtain benefits
When an employee suffers injury as a result of their employer’s breach of statutory duty or fellow employee negligence they will be entitled to seek compensation. What are the different forms of compensation
- Compensation for any expenses incurred
- compensation for loss of earnings
- Compensation for possible loss of future earnings
- compensation for pain and suffering
- compensation for other items
What is Vicarious Liability
This is when the employer is liable for the negligence of employees arising in the course of their employment
Is an employer’s liability over an employees property covered under Employers Liability
No, this is not covered because EL is concerned only with death/injury/disease. Loss/damage of property would come under public liability
What is the definition of an employee
This is any person who is under a contract of service or apprenticeship with the insured
Most policies extend the category of direct employee to include
self employed persons/hired persons/student on work experience
Why do insurers ask for an extensive list of persons employed in a firm
The intention is to ensure that the insurer receives an adequate premium by asking for declaration of wages/earning for each category, which is used to fix and adjust premium
Some diseases develop over a period of time and may not become apparent until some years after they first started, possibly after the relevant policy has expired,does the insurer still cover this
Provided the injury/disease was caused during the period of insurance, the insurer is liable and it is immaterial that the policy may have expired
For gradually developing diseases that have been progressively worsening, how does insurer provide cover
Insurers that have covered the Employers liability risk over the development period will share the costs according g to the length of time they were on risk
What are the territorial limits that generally apply
- In Great Britain, Northern Ireland, Isle of Man, the channel island
- while temporarily outside these territories sometimes restricted to non-manual workers
What are the two extensions of Employer’s Liability Policy
- Defense Costs and Expenses
2. Additional Persons Insured
Defense Costs and Expenses cover
This policy indemnifies the insured in respect of their own costs and expenses incurred in settling/defending a claim. Insurer in practice will appoint legal representatives as appropriate
Additional Persons Insured
This cover is available in respect to any director/partner/employee of the insured for any action bought against them, in their personal capacity for which the insured would be entitled to indemnity under the policy
For Employers Liability policy cover may be limited by an insurer as part of the underwriting process in terms of applying trade clauses
- by restricting the definition of b’ness
- by excluding certain kinds of work
- by excluding certain machines/processes
Most employer liability policies are rated on what
They are rated on wages for different categories of job type
Most EL policies will usually include
They will usually include reasonable precautions condition
What is reasonable precautions condition used for
It is used for affirming that the employer will comply with statutory regulations and a condition stating how the premium will be adjusted
How is the premium for employers Liability fixed and paid for
An estimate of the wages is made at the beginning of the period of insurance and a provisional premium is paid, then at the end of the period after the actual figures are adjusted, the insured either pays an additional premium or receive a rebate
What is another practice of fixing and paying employers liability premium
Applying minimum and deposit premiums, this is prompted by the insurer as a desire to retain at least the quoted premium. Premium can either remain the same(if declared figures are equal/lower than original estimates) or an additional premium is charged when the actual figures are higher
For Motor Vehicle related accident, how does employer liability apply
The law states that employer’s liability towards the driver of a vehicle is covered by the employer’s liability policy.If driver supplies a defective vehicle,(gets into an accident)
Are the claims of an employee who are passengers of the defective vehicle covered by the employer liability policies
No, they are not. They will be dealt under motor insurance policy, even if the accident occurs in the course of the employment.
Is Public Liability a specific or open policy
It is an Open policy as opposed to EL/product liability/professional indemnity which are specific policy
Public Liability is an open policy meaning that
This meaning instead of the scope of cover being specified by insured perils, it is defined by the exclusions of specific perils
Public Liability insurance provides compensation to
It is designed to compensate an insured in respect of claims for legal liability from members of the public/companies who may suffer due to their negligence or that of their employees.
To whom does a public liability policy provide indemnity to
It provides indemnity to the insured for legal liability to third parties for damages( claimant’s cost and expenses) in respect of bodily injury/death/disease/illness.
Apart from indemnity to insured for legal liability to third parties, where else do they provide indemnity
Also provides cover for any loss or damage to property which happens in connection with the b’ness insured under the policy, occurring during the period of insurance
Legal liability for public liability covers which forms
It covers all form of negligence, which is usually the most common cause of claims, also nuisance/trespass/liability under statute
Why do Some Public Liability policies mention accident
As the policy is only intended to cover unexpected events, phrases like “accidental death of /bodily injury”
In PL policy if the word accident is not used, what do insurers do instead
It is usual for the insurer to incorporate an exclusion for injury/damage which s a result of a deliberate act/omission of the insured
Injury to persons mean
This relates to bodily injury/death/illness/disease of any person, there must be some form of physical/medical impairment
Under PL, how do insurers insure loss/damage to property
Most insurers only insurer the risk of physical damage to material property and liability for loss of property. e.g. theft of customers goods at the insured premises.
Under PL, what do insurers not insure loss/damage to property
They don’t insurer risk of damage for intangibles like copyright/patent/trademark or indirect economic loss
Does PL cover Consequential loss
Yes, it covers losses directly flowing from accidents resulting in injury to persons/damage to property
Pl provides a limited form of cover for pure financial loss, which can be defined as
Financial loss which a third party may be able to claim even in the absence of injury or damage to property
What is the common limit for Public Liability cover for any one occurrence
2 million pounds, but now days they offer up to 10 million pounds
What are the two optional extensions for Public liability
- Tenant’s Liability
2. Defective Premises
Tenants’ Liability
This covers legal liability for loss/damages to leased/rented premises. Excess is between 100 and 250 pounds
Defective Premises
Legal Liability for defects in premises that have been owned or occupied, as long as the insurance remains in force
Defective Premises liability is a requirement for which act
It is the requirement for Defective Premises Act 1072, that imposes continuing liabilities up to 7 years after the disposal of property previously owned
What are the limitations of Public Liability
- Contractual Liability
- Cost of rectifying defective work
- War Risks
- Radioactive Contamination
- Injury to employee
- damage to insureds property
- product liability
- professional negligence
- Motor Vehicle
- Vessels and craft
Insurers will charge a flat rate for PL policy when
Where the risk relates only to activities at the premises. If not premiums are adjustable just like employers liability
How may product liabilty be provided
It may be issued in a combined liability policy(common, or public liability policy may be extended to cover product liability risks and it can be offered as independent of the basic public liability policy
What are the typical hazards under product liability
- Electrical appliances- faulty material or incorrect assembly
- Food manufacturers-widespread contamination of harmful foodstuff
- Tyre- defectively manufactured
- Weed Killers and fertilizers- if not applied properly may damage crops
The standard product liability policy covers
It covers legal liability for bodily injury/property damage during the period of insurance, which arises out of goods/products manufactured/constructed/repaired/serviced/treated/sold/supplied/distributed by the insured
Under product liability is financial loss covered
It only is covered if resulting from actual bodily injury or loss of or damage to property
What is the element of the basic cover of product liability
The element for product liability is that of accident, there must be an injury/damage which results from the supply of the product
Limit of Liability of the insured for product liability is chosen by
It is chosen by the insured same way as public liability policies. Usually the limit of indemnity for one period of insurance should the same figure as the amount of any one occurrence
What are the product liability exclusions
- All the ones that apply to a public liability policy
- Contractual Liability
- Damage to goods Supplied
- Faulty design/formula
- Unsuitability/failure to perform
What is contractual liability, why is it not covered under product liability
This is when the insured has entered into a specific contract with another party and has accepted more restrictive conditions than would normally apply. Product Liability does not cover the liability that exists only because of the agreement that has been made
Damage to goods supplied excluded from product liability policy
The cost of repairing/renovating/replacing/recalling unsuitable defective goods is not covered under product liability.As it is a trade risk that must either be paid by the manufacturer/supplier or they must obtain a specialized insurance
Faulty design or formula excluded from product liability policy
Product Liability does not cover any claims arising through faulty or defective design formula
Unsuitable/failure to perform excluded from product liability policy
Product liability does not cover unsuitability of the goods for the purpose for which they were designed/failure to perform the intended function
How are premiums of product liability insurance adjusted
They are adjusted in the same way as employer liability based on turnover
The companies Act 2006 codified certain responsibilities of directors, and also what did the Act impose
The Act imposes upon directors and officers responsibilities not only to their company but also shareholders/employees/creditors and the public
What are the statutory list of duties for directors
- Act within Powers
- Promote the success of the company
- Exercise independent judgement
- Exercise reasonable care,skill and diligence
- Avoid conflicts of interest
- Not accept benefits from third parties
- declare an interest in any proposed transaction with the company
Under legislation,how much is the liability of directors
The liability is unlimited, and they may be prosecuted for failures and civil remedies may also be permitted against them
What did the Companies Act 1985 impose
It imposed restrictions on the indemnity that a company could make to its directors.
What did the Companies(Audit, Investigation and community enterprise) Act 2004 allow
It allowed companies to assist their directors financially while litigation or other proceedings are going on. And also indemnify their directors against certain liabilities to third party even if the directors are at fault
Companies may choose not reimburse legal cost of directors of what likes
The may choose not reimburse the legal costs of unsuccessful defense of criminal proceedings/criminal fines and penalties of the directors
Directors Liability may arise under common law from
- Negligent Advice/misstatement
- Act outside the company’s constitution
- failure to disclose conflicting interests
- Errors of Judgement
- Negligent Supervision
- Imprudent investments
Directors and officers insurance policy is structured into two parts; which are
- cover for the directors and officers in their personal capacity where they are unable to claim an indemnity from the company
- cover to protect the company in circumstances where it is permitted to indemnify directors/officers like repayment of legal defenses
What is the basis of cover for directors and officers insurance
Claims made, thus covers all claims notified to the insurer/insured during the period of insurance, no matter when the event giving rise to the loss occurred
What else does the Directors and officers insurance indemnify
It also indemnifies personal legal representatives in the event of death/insolvency/bankruptcy of the insured
What is the policy limit for Directors and officers insurance
The limit is annual aggregate, thus meaning only one single limit for all the claims against the insured during the policy year
What are insurers willing to extend under Directors and Officers insurance
They are willing to extend the time limit in which the discovery must be made, in circumstances where a director leaves the company but has on going responsibility for incidents reported in the future
What are the main exclusions of D&O insurance policy
- prior notification- circumstances known before cover
- prior and pending litigation
- jurisdiction clause
- bodily injury and property damage
- pollution and contamination
- claims based upon improper personal gain by director
- fraud/dishonesty of a director
- insured vs insured
- breach of professional duty
- fines/penalty/punitive damages
What is the difference between claims made basis and claims occurring basis
Claims made means policy covers all claims notified to the insurer/insured during the period of insurance. Claims occurring means policy covers all claims as long as the event giving rise to a claim happens during the period of insurance, the policy will respond even when the claim is notified after policy has expired
Which policies are on claim occurring basis
Employers, Public and Product Liability
Which policies are on claim made basis
Directors and Officers Insurance; Professional Indemnity Insurance
What protection does professional indemnity insurance provide
It protects a professional person against claims which might be made alleging injury/loss resulted from their action/advice
What are some of the professional indemnity risks
- Insurance broker may confirm cover but omit to arrange it
- Investment consultant may give incorrect advice leading to financial loss
- a surveyor may give advice leading to purchase of a defective property
To whom is professional indemnity compulsory
- solicitors -under statute
2. Insurance brokers and financial advisers- as a regulatory requirement
What does professional indemnity insurance cover
This policy covers the liability of members of a profession for injury/damage/financial loss to clients/the public as a result of a breach of their professional duty/negligent acts/errors/omissions in their professional capacity
The professional indemnity law recognizes which type of claims
Claims for bodily injury/property damage/financial loss consequent upon injury/damage.
The professional indemnity law does not recognizes which type of claims
Claims for financial loss without injury/damage, unless its in the area of professional negligence, where the courts may award damages for pure financial loss
What are the extensions of cover available for professional indemnity cover
- Fidelity guarantee
- Cover for any other person/firm acting jointly with the insured
- Collateral warranties
- Liability for financial loss caused by loss of documents
- Liability for breach of warranty of authority, this is when an insured takes an action in good faith for a client but in fact not authorized to do
- Continuation of cover beyond the cancellation date in the event the firm is wound up. so claims can be made before company closes up
What risks does the professional indemnity policy exclude
- Excluding risks that are subject of public liability insuance
- Claim arising outside the UK
- dishonesty of the insured
The premium of the professional indemnity policy may be rated on
On the Gross fees
Gross Revenue
The amount of indemnity
How is the rate charged for PI vary
It will be charged based either on professions and in relation to individuals insured’s claims experience
Principally there are two types of trustee for whom cover is required. They are
- Pension fund trustees
2. Charity Trustees
Why are Trustee cover needed
This is because the law places duties on trustees
What does the Pension Act 1995 impose
This Act and subsequent regulations impose a wide range of duties upon trustees
What is the The Pension Regulator(TPR)
They are the ones that issue Trust principles and code of practice.They require trustee to inform on any perceived irregularity in the way the employer /advisers carry out the duties imposed on them
What does the trustee insurance cover
It covers internal maladministration of a pension fund resulting to court awards against trustee, losses to the pension fund and the employer and defense costs.
Is Trustee insurance offered in claim made basis or claim occurring basis
Trustee insurance is always on claim made basis
Trustee insurance provides indemnity for
It provides cover for trustees against the risk of personal liability for the commission of a wrongful act. Cover also provided for claims made against the employer company in their administration scheme.Theft of fund assets and loss of documents cover is also provided and reimbursment
One of the limitations of the Trustee insurance is the definition of “wrongful act”.What is the essence of this definition that is accepted in the policy wordings
Th wordings vary but the essence relate to breach or alleged breach of duty or trust/neglect/error/omission and includes libel/slander
What are the main exclusions under Trustee insurance
The Principle exclusions include
- bodily injury and property damage
- pollution
- fraud /willful act
- failure on the part of the employer to fund or collect contributions
Terms of Charities Act 1993 and Trustee Act 2000
They state clear responsibilities given to trustees of charities
The duties arising from the law for a charity are
The need to insure Motor Vehicle owned by the charity for Third party risks
Employer’s Liability insurance
What type of power does the Trustee Act 2000 provide to a charity
The power to insure any property that is subject to the trust against risk of loss/damage due to any event and to pay premium out of the trust funds.Failure to do so males them personally liable to make good the charity’s losses
What duty do the trustees have to a charity according to the Trustee Act 2000
They have a duty to safeguard the property of the charity from third party liabilities. Failure to do so makes them personally liable to make good the charity’s losses
How does a trustee use The Charity Commission
It uses the charity commission for advice. If they do so and follow the advice they are deemed to have acted in accordance with their theft.
Charity Trustee insurance mainly covers
This cover is designed to specifically cover the management risks incurred by the charities and their trustees. The cover goes beyond fidelity guarantee policy and provides personal indemnity to the trustees
What is Trustee reimbursement insurance
This covers the situation where trustees of unincorporated charity are faced with personal liability for a claim that should be met out of the charity’s assets but those assets are insufficient
Trustee Indemnity Insurance provides what type of cover and to whom
It provides cover for trustees against the risk of personal liability whether to the charity or third party arising from their breach of trust. Also provides personal liability for their wrongful acts as a company’s directors or officers
What are the limitation of a charity trustee indemnity insurance
The Charity Commission states trustee ndemnity insurance can’t provide indemnity for
-fines
-cost of unsuccessful defending criminal prosecutions for offences arising from fraud/dishonesty/reckles misconduct of a trustee
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Extended Warranties is offered to
This is a personal insurance offered to purchasers of consumer durable usually electrical goods
What is extended warranty insurance an extension of
It is a time extension to a manufacturer’s own guarantee, as they usually provide cover for repairs/defects for a period of 12 months.
The Extended Warranties policy indemnifies
It provides cover for free repairs following electrical and mechanical defects for a period up to 5 years
Who markets the Extended Warranty cover
It is usually marketed by retailers and some major credit card company when items are purchased using their card
Who underwrites extended warranties cover
Authorized Insurance company
Lloyd syndicate
Some insurers state that if an equipment is beyond economic repair., what further action is taken
The insurer will replace it with the nearest current equivalent model
Under Extended Warranty insurance policy who carries out repair
The supplier of the equipment
What are some of the exclusions of the Extended Warranty Insurance
- War etc
- risks normally covered under household content
- cost of repairs to bulb/aerials/external wires/knobs/handles/driving belts
- failure to comply with manufacturers instruction negligent handling
Cyber Insurance encompasses
It encompasses property/pecuniary/liability risk arising from cyber risks
Cyber Insurance offers which types of cover
IT offers two types of cover
first party Insurance( own business asset) and Third party Insurance ( covers other assets)
First Party insurance covers
- loss/damage to digital assets
- loss of income/network downtime/incident management cost
- Reputation damage -loss of intellectual property,data breach,customers
- Cyber extortion
- Theft of money/funds/digital asset
Third Party insurance covers
- Regulation actions and fines
- transmission of malware
- loss/breach of third party data
- Breach notification
- Defamation/infringement of intellectual property
Cyber Insurance exclusions are
- Employers Liability
- Product Liability
- Fines and penalties
- Time excess
What type of cover does professional indemnity provide that is excluded by most liability policies
PI makes an exception a in the area of professional negligence, where the courts may award damages for pure financial losses, which are losses without injury or damage
